Preparing a company for sale requires meticulous planning and strategic foresight. In this article, we interview leading private equity partners who share how they get their companies ready to go to market. They detail a long list of items – enhancing financial performance, streamlining operations, finding prospective buyers, navigating the due diligence process – essential to maximize value and ensure a smooth, successful transaction.
For a typical business owner this list can be daunting. And frankly, trying to manage such a list on their own can be damaging. If too much of an owner’s time, energy, and focus is transferred to efforts to sell the company – rather than run the company – business performance can suffer, and with it, a valuation.
The insights below offer a glimpse into the rigorous preparation that goes into achieving an optimal exit and why it’s most often best to have a trusted, expert M&A advisor on your team.
Explore our other articles in this series of roundtable discussions with private equity investors:
- The Signs Private Equity Looks for When It’s Time to Sell a Business
- Private Equity’s Advice to Business Owners Selling Their Company
- What Entrepreneurs Often Neglect to Do When Preparing to Sell Their Company to Private Equity
- How Private Equity Determines If a Company Is Prepared to be a Platform Investment
Meet the Panel of Private Equity Partners
The following responses have been edited for concision and clarity.
Ryan Anderson
One thing we do—typically one to two years prior to exit—is talk to advisors to understand what the market and buyer universe are looking for. At the same time, we focus on improving margins over the next 12 to 24 months, making sure we get a return for the investments made earlier in the hold period. We also evaluate the management team carefully, ensuring they’ll present well and continue to lead the company successfully for the next buyer.
Brendan Forghani
Preparation is huge. We know the types of questions buyers are going to ask and the information they’ll need, so we try to front-load as much as possible. This speeds up the process, increases certainty, and avoids surprises.
Having an investment banker for this is really helpful, as they assist in gathering all the necessary information. Entrepreneurs have an important day job running the business, so having someone to handle as much of the sale prep as possible can go a long way toward ensuring a smooth process.
Sean McNally
We almost always conduct a sell-side quality of earnings to ensure there are no surprises and that we can position the business well for potential buyers. If the company operates in a regulated industry, we do a compliance health check—often 12 months before an exit—to shore up any potential weaknesses. We also review legal documents to ensure everything is in order and avoid distractions during the deal process. These steps—financial, compliance, and legal reviews—are crucial to ensuring a smooth transaction.
Erik Dykema
One of the most important steps is conducting a sell-side quality of earnings (QoE) analysis. Many business owners hesitate to spend money on audits and financial reviews, but a QoE is critical for de-risking the sale process. It’s worth the investment.
Additionally, getting strong legal representation is essential. You want an attorney experienced in private equity transactions to navigate the intricacies of the deal and avoid any missteps.
Brandon Muirhead
You can expect an army of accountants to go through every aspect of your financials, so the first step is to make sure your financial reporting is rock solid. The systems behind your financial reporting and your ability to share its data are key indicators of a business’s health. We advise companies to get their financial house in order: tracking KPIs and metrics that show a strong understanding of the business.
Another important consideration is for owners to clearly show the trajectory their business is on. Buyers will look at your growth over the next 12 to 18 months, so it’s essential to show a growth story. It’s a balancing act between showing higher margins or faster growth, which depends on the business and industry.
